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Customer Development/Lean Startup 030210 class 7

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  • 1. Customer Development in the High Tech Enterprise Customer Validation Part 1 Steve Blank sblank@kandsranch.com 3/2/10 1
  • 2. Agenda !  Logistics/Questions !  Review !  Case: Motive !  Guest: Max Ventilla from Aardvark !  Customer Validation
  • 3. Today: Customer Validation Customer Customer Customer Scale Discovery Validation Creation Company •  Develop a repeatable and scalable sales process •  Validate your business model •  Only earlyvangelists are crazy enough to buy
  • 4. Customer Validation: Phase 3 Phase 4 Customer Positioning Business Validation Model Verified From Discovery To Creation Phase 1 Phase 2 Get Sell to Ready EarlyVangelists to Sell
  • 5. Customer Validation Get Ready to Sell! Articulate Prelim Sales Prelim Prelim Sales Hire a Align Your a Value & Collateral Distribution Roadmap “Sales Closer” Executives Proposition Materials Channel Plan Formalize Sell to “EarlyVangelists”! Advisory Board Contact Sell to Sell to Refine Refine Sales Visionary Early Channel Channel Roadmap Customers Customers Partners Roadmap Develop Positioning! Product Company Present to Positioning Positioning Analysts & Verify! Influencers Verify the Verify the Verify the Verify the Iterate or Product Sales Channel Business Exit Roadmap Roadmap Model
  • 6. Customer Validation Get Ready to Sell! Articulate a Value Proposition Inside the Building! Prelim Sales & Collateral Materials Prelim Distribution Channel Plan Prelim Sales Roadmap Hire a “Sales Closer” Align Your Executives Formalize Sell to “EarlyVangelists”! Advisory Board Contact Sell to Sell to Refine Refine Sales Visionary Early Channel Channel Roadmap Customers Customers Partners Roadmap Outside the Building! Develop Positioning! Product Company Present to Positioning Positioning Analysts & Verify! Influencers Verify the Verify the Verify the Verify the Iterate or Product Sales Channel Business Exit Roadmap Roadmap Model
  • 7. Phase 1: Get Ready to Sell Phase 3 Phase 4 !  Serious preparation Positioning Business before 1st sales Model Verified "  Another writing exercise "  Aligning Executives Phase 1 Phase 2 Get Sell to Ready EarlyVangelists to Sell
  • 8. Get Ready to Sell !  Value Proposition !  Sales Collateral !  Distribution Plan !  Sales Roadmap !  Sales Closer !  Synchronize Execs !  Advisory Board Articulate Prelim Sales Prelim Prelim Sales Hire a Align Your a Value & Collateral Distribution Roadmap “Sales Closer” Executives Proposition Materials Channel Plan Formalize Advisory Board
  • 9. Get Ready to Sell: Articulate a Value Proposition !  Create Value Proposition "  Is it emotionally compelling? "  Does it make or reinforce an economic case? "  Does the it pass the reality test? !  Varies by Market Type
  • 10. Get Ready to Sell: Preliminary Sales Collateral !  Create collateral roadmap "  What you need and when you need it "  Supports the sales roadmap "  Ensure the collateral matches the internal audiences !  Create all selling materials "  Presentations "  Data sheets "  White Papers !  How would collateral differ by Market Type?
  • 11. Get Ready to Sell: Preliminary Channel Road Map !  Channel Food Chain and responsibility !  Channel discount and financials !  Channel Management !  How would channel plan differ by Market Type?
  • 12. Channel Alternatives Pick One OEMs System Integrators Direct Sales Force Value-Added Your Your Resellers (VARs) Customers Company Dealers Distributors Retail/Mass Merchants/Online
  • 13. Channel Diagram Book Publishing Company National Publisher Wholesaler Distributor Retailer Determine Merchandise Deliver Books Allocations Titles (from printer) Stock Books Deliver Orders Sell Books -Establish Identity Ship Books -Create Demand Dispose of Acknowledge Returns Returns
  • 14. Channel Margins Book Publishing Company Publisher National Customer Distributor Retailer Wholesaler % of 35% 15% 10% 40% Retail $s $7.00 $3.00 $2.00 $8.00 $20.00
  • 15. Get Ready to Sell: Preliminary Sales Road Map !  Built around key insights about the selling process !  Answers "  Who decides the sale? "  Influencers, recommender, decision makers Where is the budget? How many sales call to the sale? To who? What is the script for each? !  Consists of: "  Organization Map "  Influence Map "  Customer Access Map "  Sales Strategy "  Implementation Plan
  • 16. Early Sales
  • 17. Get Ready to Sell: Hire a “Sales Closer” !  Identify need for a “Sales Closer "  Founders have experience “closing” business? "  Do they have a “world-class” set of contacts? "  Bet the company on their ability to close sales? !  If not, hire a “Sales Closer” "  Do NOT hire a VP of Sales "  Typical background would be a regional manager !  How does Market Type effect this hire?
  • 18. Get Ready to Sell: Synchronize Your Execs !  Product Development "  Schedule "  Deliverables "  “Good-enough” Philosophy !  Engineering’s role in sales, installation, post-sales support !  Sales Collateral review
  • 19. Get Ready to Sell: Formalize Advisory Boards !  Advisory boards are critical in nascent stages of a startup !  To sell to industry specific customers requires an industry advisory board !  Multiple Advisory Boards "  Use at different times "  Different purposes
  • 20. Phase 2: Sell Phase 3 Phase 4 !  First sales Business Positioning Model !  First channel sales Verified !  Scalable and Repeatable Phase 1 Phase 2 Get Sell to Ready EarlyVangelists to Sell
  • 21. Sell to EarlyVangelists !  Contact Visionaries !  Sell !  Refine Sales Roadmap !  Sell to Channel Partners !  Refine Channel Roadmap Contact Sell to Sell to Refine Refine Sales Visionary Early Channel Channel Roadmap Customers Customers Partners Roadmap
  • 22. Sell: Contact Visionaries !  Looking for people with problems !  They are few are far between !  They need to become your cheerleaders… while paying you to do so
  • 23. Sell: Turn Visionaries into EarlyVangelists !  Very few are early customers !  Visionaries will emerge to buy an unfinished product if it truly solves a painful problem !  A lack of these early purchasers is a red-flag !  Market Type effects ease of execution
  • 24. Build the Organization Map Dave Jones CEO Karen Rogers VP Marketing Neil Garrett Suzanne Kellogg VP Database VP Merchandizing Marketing Our Potential Customer = in house competition = issues to be addressed before a sale
  • 25. One Step at A Time Dave Jones CEO Ben White Karen Rogers VP Sales VP Marketing Joe Black Neil Garrett Suzanne Kellogg Dir. Sales Operations VP Database VP Merchandizing Marketing Leslie Elders Financial Modeling Our Potential Customer = in house competition = issues to be addressed before a sale
  • 26. Organization Map Dave Jones CEO Ben White Karen Rogers Roger Smith VP Sales VP Marketing CIO Joe Black Neil Garrett Suzanne Kellogg Phil Whitry Dir. Sales Operations VP Database VP Merchandizing Director IT Marketing Leslie Elders Geoff Smith Financial Modeling Financial Tools Development Our Potential Customer = in house competition = issues to be addressed before a sale
  • 27. The Influence Map Functional Technical High Executive 1 Low
  • 28. The Influence Map Functional Technical High Executive 1 2 CIO or Division IT executive Low
  • 29. The Influence Map Functional Technical High Executive 1 2 CIO or Division IT executive Low End Users 3
  • 30. The Influence Map Functional Technical High Executive 1 2 CIO or Division IT executive Low End Users 3 4 Corp. IT staff or Division IT
  • 31. The Sales Roadmap: Starts with Influence Map Educate & Present Solution Operational Technical High Execs CIO End IT Users Low Staff
  • 32. The Sales RoadMap: Adds Access, Assessment & Strategy Access Assess Strategy Educate & Present Needs Solution Finance Product Operational Technical Mgmt High Execs CIO Sales Intro Account Meetings Strategy Corp. End IT Mktg Users Low Staff Support IT
  • 33. The Sales RoadMap Access Assess Strategy Educate & Present Sell, Sell, Sell, Sell Needs Solution Finance Product Operational Technical Mgmt High Execs CIO Sales Implement Intro Account Proposal Meetings Strategy Plan Corp. End IT Mktg Users Low Staff Support IT
  • 34. RoadMap becomes The Sales Pipeline 4. Understand 1. Prepare 2. Initial Meeting Existing Situation • Hoovers, One • Ask tough questions a) Technology Source, Web • Do Buy- In Demo 3. Qualify? b) Organization c) Competition T h e i m 5. Custom Pitch • Prepare! 6. Win Over IT 7. Define Problem 8. ROI Pitch • Get NDA signed • Tech deep dive • Develop Action Plan • Prove the Value! 9. Exec Session • Set expectations for this meeting early on. 10. Solution 11. Formal Pricing 12. Negotiate Session Proposal • Sales •  Detailed Tech discovery • 13. Close! •  No surprises! • Finance • Support
  • 35. Sell: Sell/Refine Channel Roadmap !  Early channel partners need to be “Visionaries” !  Indirect channels/integrators have $ minimum !  Indirect channels/integrators just fulfill !  Market Type affects channel adoption
  • 36. Motive Case 36
  • 37. What happened? March 2, 2010 www.motive.com 37
  • 38. o  Closed 5 Lighthouse Customers (April 1998) #  Netscape #  Disney #  CompuCom #  JD Edwards #  Microsoft* o  Public launch April 1998 #  All 5 customers participated, #  Remedy, Vantive, Scpous, Tivoli, Software Artistry announced partnerships with Motive o  Shipped Motive System 1.0 in June 1998 o  $60M in sales bookings over next 18 months March 2, 2010 www.motive.com 38
  • 39. Lighthouse Customer Program March 2, 2010 www.motive.com 39
  • 40. Lighthouse Customer Program 26+ Customers 8-10 Customers 3-4 Customers Learning Validation (Today) Partnership •  75% of time on data gathering •  Validate Motive approach •  Joint product development •  Process slow & inaccurate •  Fine tune value proposition •  Impact final product specs •  Data captured is imprecise •  Understand whole product needs •  Early product use •  Inaccurate historical capture •  Reference customer •  Ad-hoc knowledge base tools •  Identify Lighthouse customers •  No live diagnostic tools March 2, 2010 www.motive.com 40
  • 41. Goals o  Learn about the target market #  problems, tools, methods, etc. o  Identify the core value proposition #  business drivers, metrics, payback o  Validate the Motive product #  feature, function, benefit & targets o  Establish 3-4 reference customers #  real product use prior to launch o  Generate early revenue #  just because we should ... March 2, 2010 www.motive.com 41
  • 42. Categories & Targets Bus. To Bus. Corp. Support Outsource/SI Borland Outsourcers Compaq Citicorp CompuCom Computer Moms Disney EDS Dell Fannie Mae IBM ISSC HP Printers IBM MCI/SHL Intuit Intel SAIC I2 Merrill Lynch JD Edwards Motorola SIs Microsoft Netscape BSG Netscape Northern Telecom PSW Oracle Power Computing Perot PeopleSoft Swiss Bank Redbrick TI ISPs Star-tek Traveler’s NetCentric Trilogy US Postal AOL 24 out of 39 completed March 2, 2010 www.motive.com 42
  • 43. Time and Motion Study known 70% problems problems config. related Ask the Expert... ????? Type a few lines... “name - rank - “open this file… “re-boot or serial number” run this command…” re-install” trouble ticket 25% 50% 25% ID & data gathering & solution entitlement investigation relevant activity problem occurs March 2, 2010 www.motive.com 43
  • 44. LHC Status: “Round Two” Microsoft: Approach on Zero Admin & Backoffice initiatives. Bus. 2 Bus. Strategy mtg with Maples sr. Schedule 2nd mtg. Netscape: Lost ground due to re-org. Restarting with VP of NA Sales/Services. 2nd mtg in mid Sept. Actuate: 1st mtg 8/6. Expressed interest. Need to revisit and close. Schedule 2nd mtg. Disney: 2nd mtg 8/27. Wants to be LHC. Willing to take Corp. IT Alpha code in Jan. Asked for a proposal. Travelers: 1st mtg 8/14. Wants to be LHC. Next step is tech. Demo and pilot project definition. Power Comp.: Need to schedule 2nd mtg. AOL: 1st mtg 8/27. Wants to be LHC. Sees unique Outsource uses of product. Asked for a proposal. Perot: Schedule 2nd mtg. CompuCom: Schedule 2nd mtg. March 2, 2010 www.motive.com 44
  • 45. Milestones Milestone Location Date Proof-of-Concept Demo Customer 10/1/97 Pilot project selection Customer 11/1/97 Technology Demo MOTIVE 12/1/97 Alpha code drop Customer 1/1/98 Pre-Beta status mtg MOTIVE 2/15/98 Beta code drop Customer 3/30/98 Pre-FCS status mtg Customer 4/15/98 FCS Customer 6/30/98 March 2, 2010 www.motive.com 45
  • 46. Company building March 2, 2010 www.motive.com 46
  • 47. Timeline o  May 1997 Company founded o  July 1998 Motive 1.0; 5 lighthouse customers o  1999 $60M in sales bookings against $12M target o  June 2000 European operations established o  September 2000 Software deployed on 10 million endpoints o  November 2000First of eight technology patents received o  October 2001 Asia-Pacific operations established o  November 2001Software deployed on 15 million endpoints o  January 2003 BroadJump, Inc. acquired o  September 2003 Software deployed in 30M+ products/services o  June 2004 Initial Public Offering (NASDAQ:MOTV) o  2004 $100M in revenues March 2, 2010 www.motive.com 47
  • 48. Support as a “Feature” March 2, 2010 www.motive.com 48
  • 49. End User Perspective For end users, service needs to feel more like ATM's and pay at the pump -- less like a web search March 2, 2010 www.motive.com 49
  • 50. Service Provider Perspective For service providers, automation must reduce costs and improve customer retention March 2, 2010 www.motive.com 50
  • 51. Product Traction Motive Market Market Entry Entry 1998 2001 Self-Management Self-Management for for Consumer Data Center Technologies Technologies •  10M PCs •  10K Servers, Storage •  20M Broadband Connections •  10K Enterprise Software Applications to date March 2, 2010 www.motive.com 51
  • 52. And then… March 2, 2010 www.motive.com 52
  • 53. March 2, 2010 www.motive.com 53
  • 54. After the IPO… Q2 2004: Awesome results; biggest bookings quarter ever (>$35M) Q3 2004: Awesome quarter; beating estimates Q1 2005: Awesome quarter: Raised guidance Q2 2005: Missed the number Q3 2005: Missed the number again; need to restate Q1 Q1 2006: Replaced Scott Harmon as CEO; Scott Abel and Brian Vetter leave Q2: New CEO decides to delay filing; Motive de-listed March 2, 2010 www.motive.com 54